Good afternoon, and welcome to the HC2 Holdings First Quarter 2018 Earnings Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this call is being recorded. I would now like to turn the conference over to Mr. Andrew Backman, HC2’s Managing Director of Investor Relations and Public Relations. Please go ahead.

Great. Thank you, Andrew, and good afternoon, everyone. I like to thank you for joining us to review HC2’s first quarter 2018 earnings. With me today are Philip Falcone, Chairman, President and CEO of HC2; and Mike Sena, Chief Financial Officer. This afternoon’s call is being webcast on our website at hc2.com, in the Investor Relations section. We also invite you to follow along with our webcast presentation, which can also be accessed at the HC2 website in the IR section. A replay of the call will be available approximately 1 hour after the call. The dial-in for the replay is 1-855-859-2056, with a confirmation code of 4989606. Before I turn the call over to Phil, I would like to remind everybody that certain statements and assumptions in this earnings conference call, which are not historical facts, will be forward-looking and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain assumptions and risk factors that could cause HC2’s actual results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully disclosed in our filings with the SEC. In addition, the forward-looking statements included in this conference call are only made as of the date of this call and as stated in our SEC reports. HC2 disclaims any intent or obligation to update or revise these forward-looking statements, except as expressly required by law. During the call, management will provide certain information that will constitute non-GAAP financial measures under the SEC rules, such as pro forma net revenue, adjusted EBITDA and adjusted operating income, or AOI. Certain information required to be disclosed about these non-GAAP measures, including reconciliations with the most comparable GAAP measurements, is available in the most recent earnings press release, which is on our website. And finally, as a reminder, this call cannot be taped or otherwise duplicated without the company’s prior consent. Now let me turn the call over to HC2’s Chairman, CEO and President, Philip Falcone. Phil?

Thank you, Andy, and good afternoon, everyone, thanks for joining us today. Once again, we’re going to try to keep the prepared remarks as brief as we can so we have a little bit more time for Q&A. And clearly I’ll focus my comments on some of the more meaningful accomplishments from the first quarter, including the recently announced monetization of our life sciences investments before opening it up for Q&A. Turning to Slide 5, you’ll see that there we’ve again broken out a summary of our adjusted EBITDA by segment along with our adjusted operating income for our Insurance segment. You will also notice the addition of our new Broadcasting segment, which I’ll talk a little bit about, which we’ve broken out for the first time. I’m extremely excited about what’s going on in that business and our entry point there, and I’ll have more to say about that in a few minutes. I’m going to speak, obviously, about each of our key subs, but overall this was generally a pretty decent quarter. Clearly the Marine Services segment was somewhat of an exception with the Global reporting negative adjusted EBITDA for the quarter. But again, as I’ll explain in more detail, this quarter’s Global results were primarily impacted from some short-term timing issues, mainly from some projects at HMN. As we’ve said before, given the nature of the large scale project work at Global and DBM, it means from time-to-time we can experience this sort of quarterly variability. That’s why we think it makes more sense to evaluate those businesses on an annual or LTM business – in a LTM basis, sorry. These are not businesses that can be judged or should be judged quarter-to-quarter and we’ve stated that numerous times. I would suspect that people are expecting me…

[Operator Instructions] And our next question comes from the line of Kurt Hoffman with Imperial Capital. Your line is now open

Hi, good afternoon. Hopefully I don’t start with a boring one. Congratulations on BeneVir, it seems to put you in a great position to reset the capital structures you mentioned. The bonds are now trading at something like a 6.5% yield to worst. So what’s your thought on timing there? And any changes to your expectations around the rate after the BeneVir result?

I mean, listen, I continue to think they’re very, very cheap. And would hope that it would be a little bit more reflective or the actions that we’ve taken would be a little bit more reflective. But be that as it may, we’re getting close to the right levels. As I mentioned in the body of the call, top priority for us we are all over this like a wet paper bag. I’d like to do it sooner rather than later. I’d like to have it done yesterday. We’re waiting for these things to get done and we have crossed the T’s and dotted the I’s on this. Obviously, I can’t tell you the exact date, but I want to get that kind of lock and loaded sooner rather than later. But we’re just looking at – we’re trying to be creative from a structural perspective on how fast we get it done and do things like that going forward to give us the flexibility.

So potentially doing it before the, call, premium drops? Is that on the table?

Anything is a possibility.

Okay. Okay, fine. And then turning to the Broadcast segment, negative $5 million EBITDA in the quarter. Can you talk about how you expect cash flow at Broadcast to look over the near-term and medium-term?

Yes. I mean, we’re not forecasting that, but this is again not a surprise, but more on the network side and we’re doing the things and really realize that it would take a quarter or two to get our arms around that and start reducing accordingly. But that’s a key focus of ours and it’s primarily on the network side that we’re experiencing now that’s the Azteca, not the station side the Azteca network side. And there are things that we can do to get that done. We have to get it under our umbrella and/or doing those things. But – well, we can’t project and don’t want to start projecting on that. I’m not the type that will sit and watch that number increase. And I don’t want it to increase, again, we have that kind of crossed the T’s and dotted the I’s accordingly, make sure that we’re doing the right thing, and we feel like we’ve got our arms around it and know what we need to do.

Well, I don’t want to lock you into your long-term forecast, but is $20 million cash burn for 2018, is that something we should model in?

High, that’s high.

That’s high. $15 million?

Yes. Kurt, we will give you update as we go along, clearly.

Our goal is to get that down as close as we possibly can to zero and go in the other way.

Okay.

And again, we’re not watching that – watching it instead of doing anything.

And would you expect corporate costs at life sciences to decline any with BeneVir gone?

It’s a good question. I think we should over time. My guess is depending on when it closes in the second quarter. To close this in the second quarter there will be certain expenses associated that we would have accrued accordingly and then will disappear.

Okay. All right, I’ll leave it there. Thanks.

Thanks.

Thanks, Kurt. And our next question.

Thank you. And our next question comes from the line of Sarkis Sherbetchyan with B. Riley. Your line is now open.

Thanks for taking my question here. And congrats to the teams at HC2 and BeneVir for a fantastic transaction, Phil, which if I’m not mistaken was about $8 million to HC2 on a cost basis in the past four years, if that’s right. So a lot of value creation there, right? I mean, I do agree that some can’t seem to do the math. Phil, so in that light, can you help us understand what other monetization opportunities you’re considering in the portfolio either in Pansend with a little bit more flavor there or across the broader HC2 platform?

Well, we don’t want to be traders of our assets. We clearly believe in the platform and building out things that we’re doing. We’ve got to think of taxes associated with it et cetera and we clearly zeroing our return on capital and opportunity cost on the different underlying industries. We will be opportunistic. There are things that we could do and clearly we received incoming phone calls on – and we continue and always have on some of our different assets. And that’s why I’m saying there’s always options for us, we just have to think about redeploying the capital, where – what we’re going to do with that if we can get – if we can redeploy that capital. But one of the beauties of this platform and the dynamic around the control is we can move things around. And if we believe that things are not performing and will not perform or kind of hit a peak, we will need to act accordingly. And as it relates to Pansend specifically – as I’ve mentioned in the past, we don’t want that entity is kind of a black hole of funding to commercial. And we’ve done – I think the team has done a exceptional job incubating as we said we were. Without going into too much detail, there are – there is an opportunity whether it’s JVs or strategies, et cetera, that you’re talking to and are probably heating up at the moment. But again, we wanted to make sure that we’re getting appropriate value because we do think there’s phenomenal value with the two underlying – three underlying assets quite frankly remaining there. So as it relates to what things that we could monetize, I guess you could – you have to keep a flexible mindset. But we’re kind of balancing a number of different things going forward. But we think the beauty of that is we still feel very comfortable operationally that there’s some pretty solid growth here and pretty solid cash flow especially from like a DBM where we don’t have to do kind of a major – I mean, we get to ask that question all the time. These companies have ups and downs. And as long as they’re structured right and as long as we can keep building and getting cash out of them and managing the business overall, that’s how we have to think about. But we clearly have that mindset of being flexible where necessary and unnecessary. And I think you could feel comfortable especially with Pansend some of the things, there are some opportunities there until you extract some real value that we fully expect, will probably come to the forefront sooner rather than later.

Understood, and that’s certainly a helpful color there. And I suppose thinking through what your – two receives assuming the transaction closes with regards to BeneVir, I think it was about $70 million net proceed number. A little bit of – I think there was a NOL associated, whether that could shield, right, some of the cash taxes that might be paid? What would you do with that capital? How would you redeploy it?

Well, it’s going to be more than for once. It’s probably up to $85 million. And listen, we’re – we like to – we don’t have plans to go out and buy anything at the moment. Clearly, we want to try to utilize it especially as it relates to get reduction or cost of capital, picking about cost of capital and allocating accordingly. We think it’s going to be obviously a good thing to have on our balance sheet as we look to again trying to do increase and create financing. But there is no rush to do anything with that at the moment. We think we have got the strategy for a broadcasting business and we’re doing some things there. The underlying businesses don’t need cash as you’ve seen we’ve been extracting cash. So it’s not like we’re going to turnaround and start dumping money into medium and global for one broadcasting we have a strategy ANG I think we’re pretty set. Insurance we’ve got that that deal kind of often loaded. So, well, I am try to be opportunistic where we can, but make sure it fits in with the big picture with building our platforms or building another platform, but having appropriate debt costs to – just start thinking more longer-term of that.

Understood that’s helpful. And if I kind of switch gears here, thinking through insurance, it does seem to be pretty steady and this is before bringing over the Humana LCC block of business, which I think you said would close in 3Q. Can you maybe remind us what that means as far as transforming the insurance segment? Obviously, you’re adding a big book here to the business. What would it mean from a maybe cash generation perspective? Or kind of how should we think about the changes you can make to that portfolio to be accretive to your existing platform?

Well, I think for one – one of the beauties of the long-term care space is that it’s typically 10, 15, 20 year duration capital, depending on the underlying structure of the assets or not the assets, but the policies. And keep in mind that these portfolios, I want to say are orphaned or had been orphaned, but they are managed typically in a coming lead manner where it’s a large $40 billion, $50 billion, $60 billion plus insurance companies at typically 5-year duration capital. They are not setting up a separate team to manage $1.5 billion or $2 billion. It’s a pro rata across the board. So you could see – and we have done that where you are extracting value just by going out on the curve not because of anything that the sellers have done. It’s just how they managed their business. We’re primarily short-term in nature because of – it’s a P&C business or fixed annuity business versus long-term care and you’re not going to buy a five year piece of paper of a 30 year piece of paper. You’re going to buy what a five year, typically a 5-year piece of paper because its asset liability match – matching. So you can what we found is that in these typical portfolios, there is kind of low hanging fruit that that you can extract value just by virtue of going out of the curve. And then you’ve got some – there are certain things that you could do with the portfolio, but we’ve done I think a pretty solid job with that. And you have seen our RBC, which is kind of the metric that is closely watched by the regulators if it has approved and done well then you’ve got the underlying operation that that…

That’s great. Thanks for that Phil. That will be all from me and I’m looking forward to seeing you Phil, and Andy and Mike at our conference in a couple of weeks.

Great, thanks – for your half.

Great, thanks attendees. I want to thank Phil and Mike. And I want to thank everybody here for joining us today. As always, our team is available to speak. Should you have any follow-up questions please do not hesitate to contact me directly at 212-339-5836. Andrew if you would mind would you please go ahead and provide the conference call replay instructions once again. Have a great evening everybody.

Thank you everyone.

Thank you, Mr. Backman. As a reminder this conference call will be available for replay beginning approximately two hours after this call. Dial-in for the replay is 1-855-859-2056 with the confirmation code of 498-96-06. Again dial-in for the replay is 1-855-859-2056 with the confirmation code of 498-96-06. This concludes our call. And you may now disconnect.